Adding Fixed Assets
To add an item into your fixed asset register click the "Tasks" tab. Within this screen, you will see a Fixed Assets section. Click on the title Fixed Assets and this will take you to the Asset List screen.
Click on the plus icon and then complete each of the fields as required:
Asset Name: Enter the name of the asset e.g. computer
Asset Description: Within this field you can enter as much or as little information regarding the asset. Ensure you add a clear description of the asset.
Asset Reference: Apply your internal reference here
Purchase Date: This refers to the date on the purchase invoice i.e. when did you purchase the asset.
Purchase price: This is the net cost of the asset (excluding taxes)
Then press "Save Asset"
Depreciation refers to spreading the cost of the asset over its useful life.
Complete the depreciation section as follows:
Asset Type: From the drop down list select the type of asset you are depreciating. If the asset type in question does not appear on the drop down list, you will need to add the asset type into the chart of accounts.
Rate: This refers to the % rate of depreciation that you wish to apply to the asset. The rate of depreciation is determined by the useful life of the asset. Thus if the asset has an estimated useful life of four years then the relevant rate of depreciation to apply would be 25 %( this assumes you are depreciating the asset on a straight line basis)
Account: From the drop down list select the account you wish to increase (i.e. where you what the expense to be shown in your accounts). This will be the depreciation account. You may wish to have separate depreciation accounts depending on the asset type (e.g. depreciation -computer equipment/ depreciation -fixtures and fittings).Individual depreciation accounts can be set up through the chart of accounts
Depreciation Method: From the drop down menu select the method of depreciation you wish to apply to the asset- Straight Line/Reducing Balance. Straight Line method involves depreciating the net cost of the asset on an annual basis resulting in the same depreciation charge each year, while reducing balance involves depreciating the asset based on Net Book Value
Accumulated amount: Ensure you link the fixed asset to the correct accumulated depreciation account. In the event that the accumulated depreciation account you wish to offset the depreciation against does not appear in the drop down list, you will need to set this up in the chart of accounts.
Tips re depreciation
Depreciation is a non cash flow item i.e. it has no impact on the day to day cash flow of the business yet it must be recorded.
Reducing Balance Method: This method of depreciation assumes that an asset loses more value during the earlier years of its life. Thus the depreciation charge in the accounts will reduce each year if the reducing balance method is applied.
Straight Line Method: This method of depreciation assumes that the asset will lose an equal amount of value each year. Thus the depreciation charge in the accounts in relation to the particualr asset will be the same each year.